Wednesday, May 14, 2008

Lord King Chairman of the Bank of England made his annual speech to the great and the good of the City of London at the Mansion House on the 16th June 2007...

"Our central view remains that inflation will fall back this year as the rises in domestic gas and electricity prices last year drop out of the annual comparison, and the recent cuts in prices feed through to household bills."

Chart 2 shows the Committee’s best collective judgement of the outlook for CPI inflation, assuming that Bank Rate follows market yields. In the central projection, inflation falls back sharply to below the target over the next year as the effect of lower domestic energy price inflation feeds through, partly offset by companies taking advantage of buoyant nominal demand to raise margins. It then edges back up to settle around the target, as the near-term falls in domestic energy prices drop out of the twelve-month rate.

The policy decision The Committee (The Monetray Policy Committee)noted at its May meeting that the centralprojection, under the assumption that Bank Rate followed market yields, was for inflation to fall back sharply in the near term and then to settle around the 2% target in the medium term. Given that outlook and bearing in mind that the balance of risks to inflation was to the upside, the Committee judged that an increase of 0.25 percentage points in Bank Rate to5.5% was necessary to meet the target for CPI inflation over the medium term.

We know of course this projection was total bollocks, demand, low stocks, fertiliser costs, low yields due to drought were all forcing grain prices up and with them the price of animal feedstocks and food ingedients.On top of this the massive move to bio fuels, especially the use of corn in the USA was adding a further boost to retail price inflation.

Energy were in the same way being affected to demand worldwide, especially in the far east as emerging economies were growing at growth rates of 8/9/10 percent.

It appears that the only people in the world unaware of these demand driven price increases were the double firsts sat in the Treasury and Threadneedle Street and the self important guardians of the MPC.

Sharp eyed observers will notice there is quite a disparity between the two graphs - which emphasises what a lot of bollocks the one for May 2007 was, as a forecast.

...or to put it another way ...

Now if you were hiring anyone to make sensible, rational forecast on inflation would you rely on this bunch of dumb cunts ?

Considering the triumphs of the Meteoroligical Office in forecastuing the weather last summer, one can only say the performance of Mervyn's masterminds was no worse than any of the other fucking stargazers in Government service.

2 comments:

A rigorous analysis of the 'fan' range suggests that the Bank of Engerland thinks 'things' might be very bad, ok or somewhere in between. Any of these conditions may apply in the short,medium and long term.Right now, we're fucked.